Yahoo-Microsoft search deal is reportedly close

Yahoo and Microsoft will announce a search engine advertising partnership as soon as tomorrow, according to news reports.

The high-profile deal, which allies two technology giants in their battle against Google, would follows more than a year of on-again, off-again negotiations.

Under the proposed alliance, Yahoo would replace its search technology with Microsoft new entry, Bing, according to the technology blog AllThingsD. Yahoo would continue to sell search ads on its own sites, and on some of Microsoft’s, although it would be done through Microsoft’s advertising system.

The agreement is less ambitious than proposed last year by Microsoft, which at one point, tried to acquire Yahoo in a $47.5 billion hostile takeover bid. It also falls short of a separate Microsoft offer to buy Yahoo’s search business, which Yahoo management rejected last year.

In this case, Yahoo would get no upfront fee. Both companies would share the search advertising revenue.

Some of the financial details are still unclear, according to news reports. Although negotiations are over, the deal has yet to be signed and could be delayed.

There are some concerns about regulatory approval, given the size of the companies involved. However, they control less than 30 percent of the U.S. search market, compared with 65 percent for Google.